Treasury Secretary Scott Bessent on Friday said that the American economy may slow during a ‘detox period’ as the Trump administration slashes public spending.
But he said it would be short-lived as private money filled the gap left by government cash.
It comes amid a string of indicators warning of turbulence ahead and after President Donald Trump admitted on Tuesday that his plans for tariffs would trigger market uncertainty.
‘Could we be seeing this economy, that we inherited, roll a bit? Sure,’ said Bessent on CNBC’s Squawk Box.
‘Look, there’s going to be a natural adjustment as we move away from public spending to private spending.
‘The market and the economy have just become hooked, and we’ve become addicted to this government spending, and there’s going to be a detox period.’
The Trump administration has moved quickly to end what it claims is waste and fraud in federal spending.
Fuelled by Elon Musk‘s drive at the Department of Government Efficiency, it has laid off thousands of workers, canceled contracts, and shuttered USAID.
Treasury Secretary Scott Bessent on Friday said that the American economy may slow during a ‘detox period’ as the Trump administration slashes public spending
Friday’s job figures showed unemployment ticking up slightly in February
But that means choking off billions of dollars that would have flowed from government coffers into the wider economy.
Bessent said the cuts would go hand in hand with deregulation, making it easier for the private sector to compensate.
‘We are going to have safe and sound regulation to get our banking system going again,’ he said.
‘So the banks should be generating loans to private companies. Employment should be from private companies, not from government, and I’m confident, if we have the right policies, it’ll be a very smooth transition.’
He spoke shortly before the latest job figures were published. It showed a slight uptick in payroll numbers in February, although the overall unemployment rate moved from up a tenth of one percent to 4.1 percent.
A day earlier, Bessent defended Trump’s position on tariffs, which has put markets on edge amid warnings it will push up prices for consumers.
‘Access to cheap goods is not the essence of the American dream,’ he said in a speech to Economic Club of New York.
‘The American Dream is rooted in the concept that any citizen can achieve prosperity, upward mobility, and economic security.
The Trump administration had moved quickly and aggressively to cut public spending
‘For too long, the designers of multilateral trade deals have lost sight of this.’
Economists are not the only ones who have admitted tariffs could cause problems.
Trump admitted they could bring market turbulence during his address to Congress on Tuesday night.
‘Tariffs are about making America rich again and making America great again. And it’s happening, and it will happen rather quickly,’ he said.
‘There will be a little disturbance, but we’re OK with that. It won’t be much.’
He spoke after markets had fallen for the second day running, as economists worry that his back and forth with allies over tariffs is causing uncertainty and amid wider fears that they will push up prices.
